Land Contract

An alternative to a non-conforming loan is the use of a land contract, which is allowed in some states. A land contract is an agreement between a buyer and a seller, where the buyer agrees to make periodic payments to the seller. The title to the property only transfers to the land contract buyer on fulfillment of the land contract obligations.

A land contract can be helpful for those who need time to establish or improve their credit rating. There are only small closing costs, and payment can help establish a good mortgage payment record. This can help establish an overall good credit rating, and it is possible for the buyer to later refinance the land contract with a conforming loan.

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The No-Cost Thirty Year Fixed Rate Mortgage

There really is no such thing as a "no-cost" mortgage loan. There are always costs, such as appraisal fees, escrow fees, title insurance fees, document fees, processing fees, flood certification fees, recording fees, notary fees, tax service fees, wire fees, and so on, depending on whether the loan is a purchase or a refinance. The term "no-cost" actually means that your lender is paying the costs of the loan. All a "no cost" loan means is that there is no cost to you, the borrower.

Except that you pay a higher interest rate.

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The Advantages of Different Types of Mortgage Lenders

What kind of lender is "best?"

If you ask a loan officer, "What kind of lender is best?" it is going to be whatever kind of company they work for and they will give you a list of reasons why. If you meet the same loan officer years later, and they work for a different kind of lender, they may give you a list of reasons why that type of lender is better.  Reputable lenders will refer you to an establishment that may have the type of loan that would work best for you, if they don't offer that particular product.

Realtors will also have differing opinions, and their opinions have changed over time.

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Types of Mortgage Lenders

Mortgage Bankers

Mortgage Bankers are lenders that are large enough to originate loans and create pools of loans which they sell directly to Fannie Mae, Freddie Mac, Ginnie Mae, jumbo loan investors, and others. Any company that does this is considered to be a mortgage banker. Idaho's best Mortgage Lender is Leon Baker.

Some companies don't sell directly to those major investors, but sell their loans to the mortgage bankers.

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Where Does the Money Come From for Mortgage Loans?

In the "olden" days, when someone wanted a home loan they walked downtown to the neighborhood bank or savings & loan. If the bank had extra funds laying around and considered you a good credit risk, they would lend you the money from their own funds.

It doesn't generally work like that anymore. Most of the money for home loans comes from three major institutions:

  • Fannie Mae (FNMA - Federal National Mortgage Association)
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    Items You Need for When Applying For a Loan

    Have These Items Ready When You Apply For a Loan

    It used to be that lenders mailed out verifications to employers, banks, mortgage companies, and so on, in order to verify the data supplied by borrowers. Nowadays, the interest is often in speed and getting answers quickly, so "alternate documentation" has become more widely used. Alternate documentation means that underwriting answers can be obtained with information supplied directly from the borrower instead of waiting around for verifications to come back in the mail.

    Read more: Items You Need for When Applying For a Loan

    FICO Score - a Brief Explanation

    When you apply for a mortgage loan, you expect your lender to pull a credit report and look at whether you've made your payments on time. What you may not expect is that they seem to be more interested in your "FICO" score.

    "What's a FICO score?" is a common reaction.

    Each time your credit report is pulled, it is run through a computer program with a built-in scorecard. Points are awarded or deducted based on certain items such as how long you have had credit cards, whether you make your payments on time, if your credit balances are near maximum, and assorted other variables.

    Read more: FICO Score - a Brief Explanation

    Which ARM is the Best Alternative?

    How would you like a mortgage loan where you did not have to make the whole payment if you did not want to? Or would you like a loan with an interest rate about one percent below a thirty-year fixed rate mortgage and pay zero points? Or a loan where you did not have to document your income, savings history, or source of down payment? How would you like a mortgage payment of only 2.95 percent? You can have all that with the 11th District Cost of Funds Index (COFI) Adjustable Rate Mortgage.

    Sound too good to be true? Sound like a bunch of hype?

    Read more: Which ARM is the Best Alternative?

    Closing Costs When Buying or Refinancing a Home

    You will receive a detailed summary of costs you may have to pay when you buy or refinance your home. They are listed in the order that they should appear on a Good Faith Estimate you obtain from a mortgage lender. There are two broad categories of closing costs. Non-recurring closing costs are items that are paid once and you never pay again. Recurring closing costs are items you pay time and again over the course of home ownership, such as property taxes and homeowner's insurance. Some of the items that appear here do not traditionally appear on a lender's Good Faith Estimate and lenders are not required to show all of these items.

    Read more: Closing Costs When Buying or Refinancing a Home

    The Biweekly Mortgage - Who Needs It?

    Have you received an advertisement offering to save you thousands of dollars on your thirty-year mortgage and cut years off your payments? With email "spam" becoming more pervasive as everyone tries to "get rich quick" on the internet, these ads are popping up with troublesome regularity.

    The ads promote the "Biweekly Mortgage" and for the most part, do not come from a mortgage lender. Exclamation points punctuate practically every claim:

  • No closing costs!
  • No refinancing!
  • Read more: The Biweekly Mortgage - Who Needs It?

    Documenting Your Assets - Verifying Your Down Payment

    When buying a home, it is not enough to just "come up" with the money. With the exception of "no asset verification" loans, lenders want to verify where the money comes from. If you can document the funds comes from your personal savings, the lender is more confident of your strength as a borrower.

    In addition, if you can verify you have additional assets that are not needed for the down payment, it is important to document those, too. Additional assets are "reserves" you can draw upon during times of trouble, such as unemployment, medical emergencies, and similar occurrences.

    Read more: Documenting Your Assets - Verifying Your Down Payment